South Africa's factories hit weakest point of 2026 as output slumps

JOHANNESBURG, Sept. 1 (Reuters) — Factory operators across South Africa ended August in their worst shape this year, with a closely watched measure of manufacturing health sliding to its lowest reading of 2026.

The Absa purchasing managers’ index, which tracks sentiment among factory operators, fell to 45.8 in August from 46.8 in July. That marks four consecutive months of contraction. Any reading below 50 signals deteriorating conditions for producers.

The pain was sharpest in two areas. Business activity collapsed to 40.2 from 48.8, the weakest level this year. New sales orders dropped to 40.3 from 44.1, wiping out the modest gains manufacturers had managed to post the month before. Together, those figures mean factories are both producing less and receiving fewer orders to fill.

Absa’s analysis identifies a domestic demand crisis as the primary driver. Export sales showed modest improvement, but at home manufacturers reported subdued demand, weak consumer confidence, and restrained spending on non-essential goods. Ordinary South Africans pulling back on discretionary purchases, combined with broader economic uncertainty, has left factory floors quieter than producers would like.

Employment offered a small reprieve. The sub-index measuring factory jobs rose to 46.2 from 42.2, meaning job losses continued but at a slower pace than in earlier months. Some manufacturers, despite the current weakness, have not yet moved to deeper workforce cuts.

The most striking finding, though, came in forward-looking sentiment. Manufacturers’ expectations for business conditions six months ahead jumped to 54.7 from 49.3, crossing back above the neutral 50 threshold for the first time in months. Factory operators, in other words, believe the worst may be temporary.

Absa urged caution about reading too much into that optimism. “This provides some hope that manufacturers view the current weakness as temporary, although the combination of subdued orders and sharply weaker production suggests that near-term conditions remain challenging,” the bank said.

By contrast, the gap between that forward confidence and the present reality is wide. Workers and factory managers are navigating a domestic market where consumer wallets are tight and orders are thin, even as they hold onto the belief that conditions will turn. Whether that belief holds through the months ahead, or erodes under continued pressure, may determine how deep this contraction ultimately runs.